Instructions For Form Ftb 3801-Cr - Passive Activity Credit Limitations - 2000

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2000 Instructions for Form FTB 3801-CR
Passive Activity Credit Limitations
These instructions are based on the Internal Revenue Code (IRC) as of January 1, 1998 and the California Revenue and Taxation Code (R&TC).
General Information
S Corporations
adjusted gross income reaches $350,000
($175,000 if married filing a separate return and
The passive activity loss (PAL) rules apply as if
you lived apart for the entire year).
the S corporation was an individual. This means
In general, California tax law conforms to the
that losses from passive activities may not be
Internal Revenue Code (IRC) as of January 1,
E Passive Activity Credit
used to offset nonpassive income, except for
1998. However, there are continuing differences
Carryovers
$25,000 in losses from rental real estate
between California and federal tax law. California
activities. See IRC Section 469(i). However, the
has not conformed to most of the changes
Passive activity credits are suspended and
material participation rules apply as if the
made to the IRC by the federal Internal Revenue
carried forward indefinitely. Unlike losses,
S corporation was a closely held corporation.
Service Restructuring and Reform Act of 1998
suspended credits are not allowed when you
The material participation rules for closely held
(Public Law 105-206) and has not conformed to
dispose of the activity. However, you may elect
corporations are explained in the instructions
any of the changes made by the Tax and Trade
to increase your basis (by the amount of the
for federal Form 8810, Corporate Passive
Relief Extension Act of 1998 (Public Law
original basis reduction) to the extent the credit
Activity Loss and Credit Limitations. See IRC
105-277), the Miscellaneous Trade and
has not been used.
Section 469(h)(4) and the related regulations
Technical Corrections Act of 1999 (Public law
The credit becomes allowable under the passive
for more information.
106-36), and the Ticket to Work and Work
loss rules when there is sufficient passive
Incentives Improvement Act of 1999 (Public
To compute your California passive activity
income to allow its use or it is within the scope of
Law 106-170).
credit limitations for S corporations, use the
the rental real estate rule. Once the credit
worksheets in the instructions for federal
Expense treatment for small business (IRC
becomes allowable under the passive loss rule, it
Form 8582-CR using California amounts. Enter
Section 179(b)(1)): California law conforms to
is subject to the other limitations applicable to
the amount from line 21 of Form 100S,
federal law regarding the IRC Section 179(b)(1)
the use of credits, such as the limitation that
California S Corporation Franchise or Income
deduction. For 2000, the maximum deduction is
credits may not reduce regular tax below
Tax Return, on line 10 and line 22 of form
$20,000.
tentative minimum tax.
FTB 3801-CR in place of the federal modified
The following may affect the computation of
In addition, the treatment of passive activity
adjusted gross income.
your passive activity credit limitations:
credits is determined in all respects by the
C Who Must File
Passive loss rules (IRC Section 469(c)(7)):
general rules applicable to those credits,
Beginning in 1994, and for federal purposes
including carryover periods.
Form FTB 3801-CR is filed by individuals,
only, rental real estate activities conducted by
estates, trusts, and S corporations with any of
F Overview of Form
persons in a real property business are not
the following credits from passive activities:
automatically treated as passive activities.
The form consists of six parts.
Credit
Code
California did not conform to this provision.
Orphan drug credit carryover
185
Part I — 2000 Passive Activity Credits
Amortization of certain intangibles (IRC
Low-income housing credit
172
Use Part I to combine your credits from passive
Section 197): Property classified as IRC
Research credit
183
activities to determine if you have passive
Section 197 property under federal law is also
Targeted jobs credit*
166
activity credits for 2000.
IRC Section 197 property for California purposes;
*For credit generated prior to January 1, 1996.
If your credits from all passive activities exceed
there is no separate California election required
Note: Make sure to enter the code number for
the tax attributable to net passive income, you
or allowed. However, for California purposes, in
your credit on your return when you are able to
may have a suspended passive activity credit for
the case of IRC Section 197 property acquired
claim the credit.
2000. Generally, you have net passive income if
before January 1, 1994, the California adjusted
form FTB 3801, line 3 shows income. See the
basis as of January 1, 1994, must be amortized
D Passive Activities
instructions for form FTB 3801-CR, line 6 for
over the remaining federal amortization period.
details.
Therefore, you may have a difference in net
See the instructions for federal Form 8582-CR
income (loss) from passive activities which
for information about passive activities and
Part II — Special Allowance for Rental Real
.
involve amortization of certain intangibles
passive activity credits.
Estate Activities with Active Participation
Use Part II to figure the credit allowed if you
Dispositions
A Purpose
have any credits from rental real estate activities
Unallowed passive activity credits, unlike
Use form FTB 3801-CR to determine whether
in which you actively participated (other than
unallowed passive activity losses, are not
you have a passive activity credit for the current
low-income housing credit). See the instruc-
allowable when you dispose of your interest in
taxable year and, if so, how much of the credit
tions for federal Form 8582-CR, “Rental
an activity in a taxable transaction. However,
is allowed for the current year. The amount of
Activities.”
you may elect to increase the basis of the credit
the credit that is unallowed is carried forward.
property by the amount of the original basis
Part III — Special Allowance for Low-Income
reduction of the property to the extent that the
B Special Note
Housing Credits for Property Placed in Service
credit has not been allowed under the passive
Before 1990 (or from Pass-Through Interests
Generally, California law is the same as federal
activity rules. No basis adjustment may be
Acquired Before 1990)
law concerning passive activity credit limita-
elected on a partial disposition of an interest in
Use Part III to figure the credit allowed if you
tions. See the instructions for federal
a passive activity.
have any low-income housing credits for
Form 8582-CR, Passive Activity Credit Limita-
Caution: In computing the special allowance for
property placed in service before 1990. Also,
tions, for definitions.
rental real estate activities with active participa-
use this part if your low-income housing credit
Personal service corporations and closely held
tion, the dollar limitation for the low-income
is from a partnership, S corporation, or other
corporations subject to the passive activity rules
housing credit is more than the amount allowed
pass-through entity in which you acquired your
must use form FTB 3802, Corporate Passive
under federal law. The California limitation is
interest before 1990, regardless of the date the
Activity Loss and Credit Limitations, instead of
$75,000 ($37,500 if married filing a separate
property was placed in service.
form FTB 3801, Passive Activity Loss Limita-
return and you lived apart the entire year). For
tions, and form FTB 3801-CR.
California purposes, you may not claim passive
activity low-income housing credit when
FTB 3801-CR Instructions 2000 Page 1

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